Asked by Mercedez Miller on Jul 11, 2024
Verified
As output rises
A) fixed cost and average fixed cost both rise.
B) fixed cost and average fixed cost both fall.
C) fixed cost and average fixed cost are constant.
D) fixed cost falls and average fixed cost is constant.
E) fixed cost is constant and average fixed cost falls.
Fixed Cost
Costs that do not vary with the level of output or business activity, such as rent, salaries, and insurance premiums.
Average Fixed Cost
The fixed costs of production divided by the quantity of output produced, representing how fixed costs dilute as more units are produced.
- Examine how shifts in output affect fixed, variable, and total expenditures.
Verified Answer
JD
Jaspreet DhaliwalJul 11, 2024
Final Answer :
E
Explanation :
Fixed cost is a cost that does not change with the change in output. Therefore, it remains constant irrespective of the level of output. On the other hand, average fixed cost is computed by dividing fixed cost by output. Hence, as output rises, average fixed cost falls.
Learning Objectives
- Examine how shifts in output affect fixed, variable, and total expenditures.